The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy – all the capital misallocation, all the malinvestment – and prevent the market’s attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I’d only be repeating what I’ve been saying over and over – not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary.

The president assures us that his administration “is working with Congress to address the root cause behind much of the instability in our markets.” Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that “low interest rates” led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments – investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or “wildcat capitalism” (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: “Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.”

Doesn’t that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn’t that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn’t the federal government shown that the “many” who “believed they were guaranteed by the federal government” were in fact correct?

Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary “the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet.” Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.

F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day – and which are being proposed, just as destructively, in our own:

Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection – a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end… It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.

The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?

Oh, and did you notice that the bailout is now being called a “rescue plan”? I guess “bailout” wasn’t sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you’re supposed to have a voice in all this actually seems to annoy them.

I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects – the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.

H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.

In a June 6 column published by The Economist, Peter Schweizer indicated that the richer and more powerful liberals are the harder it is for the needy to get any donations.

Many modern liberals like to openly discuss their altruism. Garrison Keillor explains that “I am liberal and liberalism is the politics of kindness.” But it rarely seems to turn into acts of kindness, especially when it comes to making charitable donations, wrote Schweizer.

To back his claim, Schweizer presents a who’s who of liberal stars including New York Attorney General Andrew Cuomo, Al Gore, Senator Barack Obama, Senator John Kerry, Senator Ted Kennedy, Robert Reich, and Jesse Jackson. None of these champions of the poor and oppressed has given much if anything at all to any charitable organization. Schweizer looked at their income tax returns and financial statements.

Kennedy has been in Congress since the 1960s. He is the most experienced champions of passing federal law to help the poor, which in turn has helped the federal government to expand it powers. The long debated No child Left Behind version of the Elementary and Secondary Education Act apparently never helped to close any gap between the poor and the other students. The rhetoric about underachieving urban poor, dropouts, and our kids uncompetitive underachieving compared to the rest of the world is the same old song and dance liberals and opportunists have repeatedly said needs fixing since the 1960s. What it actually means is give government’s public schools more money and more control over public education to the federal government.

The greatest liberal icon of the 20th Century is Franklin Delano Roosevelt. He is regarded by many on the left as the personification of charity and compassion, but FDR actually has a slim record when it comes to giving to charity.

Compared to liberals today, FDR was very generous. He actually gave 2-3% of his income compared to 0-1% given by the above-mentioned liberals.

The point is liberals are all talk. They don’t really care much about the poor. If they actually did, they not only would give generously to those in need but would also have changed the political economy making it difficult for poverty to exist. Of course, they would want to do that for several reasons: One, they don’t care about people they neither know nor want to know. Two, their power, prestige, and wealth is engendered at the expense of the poor. Three, actually changing the political economy would screw up the entire agenda of the Left.

Okay, liberals are no more generous are caring than many other Americans. So are we to believe the compassionate conservatives are any different? Schweizer’s answer is a resounding yes.

President Ronald Reagan … was often called heartless and callous by liberals. Unlike Roosevelt or JFK, Reagan was not a wealthy man when he became president. He had no family trust or investment portfolio to fall back on. And yet, according to his tax returns, Reagan donated … four times more to charity — both in terms of actual money and on a percentage basis — than Senator Ted Kennedy. And, he gave more to charities with less income than FDR did. In 1985, for example, he gave away 6 percent of his income.

George W. Bush and Dick Cheney have continued this Reagan record. During the early 1990s, George W. Bush regularly gave away more than 10 percent of his income. In 2005, Vice President Dick Cheney gave away 77 percent of his income to charity. He was actually criticized by some liberal bloggers for this, who claimed he was getting too much of a tax deduction.

I suspect many of the reviled Right give considerable amounts of money to all sorts of charitable organizations, and not just to their churches. Referring to a Hudson Institute article, Ron Paul said,

American citizens voluntarily contributed three times more to help people overseas than did the United States government. This should not surprise us at all, as Americans are generous to those in need, whether here or abroad. There are so many moral, religious, and human reasons to help our fellow men and women in need. It is only when government gets in the way and tries to crowd out private charity that problems arise. (emphasis added.)

There are good reasons why the US Constitution does not allow our government to send taxpayer money overseas as foreign aid. One of the best is that coerced “charity” is not charity at all, but rather it is theft. If someone picks your pocket and donates the money to a good cause it does not negate the original act of theft.

Besides sound research showing the 16th amendment to the Constitution was not legally ratified, our tax dollars should not be used to enlarge and empower the federal government at the expense of the poor or the rest of us. The federal government taking power not conferred upon them by the American people is not for our benefit. Robert Reich claims American major corporations are the real culprits impoverishing Americans. These economic leeches robbing Americans economic well-being make welfare programs necessary. In his book Liberal Fascism, Jonah Goldberg says the situation was planned by New Deal liberals.

Today is an exciting day for the Ron Paul campaign and the movement: His latest book, The Revolution: A Manifesto, was officially released today.

Although a short book, it is the product of many years of thought and action. It is a defense of the principles of founding ideals which Paul and supporters have devoted their lives.

These principles – individual liberty, sound money, the Constitution, and the foreign policy of the Founding Fathers – have had no home in American politics for a very long time. “With The Revolution: A Manifesto, I’m letting the establishment know we’re not going away,” Paul said.

Finally, Americans can hear and judge these great American principles for themselves, instead of through an unfriendly media filter. And they can learn once and for all that they need not be satisfied with the phony choices the system offers them every four years. Another way really is possible.

“Two days ago I did a book signing in New York at the Borders on Wall Street. All 530 copies had been sold before I even arrived.”

A recent Gallup poll asked a little over 1,000 Americans the following question: “In politics, as of today, do you consider yourself a Republican, a Democrat, or an independent?” The graph below reveals how Americans responded compared to similar surveys for the past three months. (more…)

Have you been listening to the national media’s campaign coverage? It seems ultra-liberal Hilary Clinton is now a born-again religious centrist. She now regularly uses the G— word. Her live-in personal aid I a devout Muslim. Bill also frequently heard using the G—word while stumping for Hilary. In all fairness, Hilary has her Methodist roots, and Bill his Baptist background. Echoing other liberal and social concern religious leaders, the Clinton’s are preaching the “take-back-American-politics-from-the-religious-right” movement. Many of those liberal and socialist religious leaders have been campaigning for universal health care, abortion, immigrant amnesty, gay agenda, forced gay sex-education for elementary children, voucher-less school funding, no parental rights over kids sexual or abortion decisions, evolution-only education, more federal regulation of state and local education, and on and on. Thus, like the proverbial big bad wolf parading in sheep clothing, Hilary represents secularists in religious clothing. (more…)

How the Media Pick Candidates by Cliff Kincaid of Accuracy in Media is a must read for anyone interested in how the media bias against certain candidate works. The primary target of the media bias is Ron Paul and another is John Huckabee. The media has blacked out Ron Paul almost entirely. Here are some excerpts from Kincaid’s article:

Whatever you think of Ron Paul, you have to admit that the media are notoriously biased against him. The Fox News Channel unfairly excluded him from its January 6 debate, while MSNBC and CNN tried to keep him from speaking for any significant length of time during their January 24 and January 30 debates. This is a candidate, we must recall, who placed second in the Republican Nevada caucuses on January 19, beating John McCain.

According to an on-line poll at the Nevada Policy Research Institute, the presidential candidate with the best economic plan is Ron Paul. One reason may be Nevadans prefer to regulate their own gambling-based economy rather than the distant millionaire’s club on Capitol Hill. That just my guess. (more…)

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Here’s A Thought!

If companies (e.g., banks) are big enough, and the country is rich enough, corporate managers and investors can use the government as the ultimate insurance policy to bail them out if speculative risks go wrong. -- Robert Isaak (2005)